Aussie dollar slips on slowdown worry; bonds surge

Aussie dollar slips on slowdown worry; bonds surge

2008-11-11 05:55 UTC (GMT)

SYDNEY, Nov 11 (Reuters) - The Australian dollar eased onTuesday, hurt by a revival in risk aversion amid renewedpessimism about the global economy, prompting investors to steer away from other riskier assets like stocks and commodities. A private sector business survey added to a gloomy picturefor the Australian economy with the latest inflation data from China also confirming that the world's fourth-largest economy was cooling. Those worries along with concerns about the future of big American corporates like General Motors, whose shares dived to a 62-year low on Monday, saw investors move to the safety of low-yielding currencies and government bonds.Stocks, commodities and higher- yielding currencies hadreceived a boost on Monday after China announced a huge fiscalstimulus package worth almost $600 billion at the weekend. 'The bleak string of headlines in the U.S. caused risk aversion to rear its head and spur a sell-off in the Aussie,'said Besa Deda, chief economist at St George. 'We continue to think that any rally in the near term in the Aussie up near the $0.7000 remains a sell and we continue to look for a weaker Aussie closer to $0.6000 by the end of this year.' By 4:15 p.m. (0515 GMT), the Aussie was at $ 0.6719 against the U.S. dollar, down from $0.6866 late here on Monday. It rose as high as $0.6985 on Monday, not far from a peak of $0.7015 struck on Nov. 4. Lower regional stock markets pulled the Aussie down to 65.86 yen, from 67.93 yen, as demand for leveraged carry trades took a hit. Commodities also took a battering with the rally in base metals running out of steam as concerns of a global recession returned. Australia is a big exporter of commodities and the recent slide in natural resources has been a factor in the Aussie's decline from 25-year peaks hit in mid-July. Australian bond futures rallied on safe-haven inflows while December bill futures rose on expectations of aggressive interest-rate cuts next month.The central bank cut its cash rate by a larger than expected 75 basis points to 5.25 percent last week, after a 100 basis point cut in October. Markets are pricing in chances of a nearly 100-point cut next month as the RBA tries to cushion the economyfrom the adverse impact of a credit crunch.Three-year bond futures jumped 0.195 points higher at 96.00 , while the 10-year futures contract surged 0.155 points to 94.96.